David Prosser: Today Japan, tomorrow America?
Outlook So when are you selling Fresh & Easy? That was the first question put to Tesco's chief executive, Phil Clark, yesterday following his announcement that the supermarket is getting out of Japan, having failed to crack the market there. After all, the US has been a much more high-profile international failure than Japan for Tesco, so if Mr Clark is the pragmatist he says he is, an exit must surely follow.
In fact, "inappropriate" was the word Mr Clark used to describe comparisons between Japan and the US. And that is fair – to a point. For one thing, Japan has long been regarded as a graveyard for international supermarket groups, with Wal-Mart and Carrefour having struggled to make it there too. Moreover, Tesco's performance in Japan has been substantially worse of late than in the US, at least in terms of the way sales have been declining. A third difference is that Tesco's Fresh & Easy concept in the US is a different type of offer – and the retailer claims to have a recovery plan in place for the venture that will see it break into profit sooner rather than later.
Nevertheless, Mr Clarke's decision to walk away from Japan, made within six months of him taking over from Sir Terry Leahy at the top of Tesco, is an important precedent. It suggests he is more focused on earnings than empire-building – and that he will not be afraid to dump Fresh & Easy if the recovery plan fails, as many cynics expect it to.
For that, Tesco shareholders ought to be grateful. So too for the lessons to be learnt from the Japanese misadventure – that scale is crucial in these international ventures, and that a local business model may be more successful than imported practices. As for Tesco's US management, they have been put on notice.
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